Unprecedented! What we really think is going on is both investors and corporate management are having a hard time understanding the real economic impact of “unprecedented” policies. As a result, normal macroeconomic analysis isn’t as helpful.
A Recession Is Unlikely in 2022...market pessimism has gotten ahead of itself and there is room for economic news to come in better than expected in the immediate year ahead.
Reducing Our Stock Market Forecasts. Given the surge in long-term interest rates this year, the US stock market is now fairly valued for the first time in over a dozen years, dating back to the Panic of 2008.
Whipping Inflation. Ultimately, inflation is always and everywhere a monetary phenomenon, as the late great economist Milton Friedman used to say.
Focus on the Money, Not Rates. The bottom line is that monetary policy is still very loose and likely to stay that way. And investors need to follow the money: both M2 overall and the money the banks are getting from the Fed. For now, neither are bearish signs.
Slower Growth in Q1...Because of the shutdown and government actions growth has been uneven...will start to balance out during 2022 and beyond.
Housing: Heartburn, Not a Heart Attack. It is true that national home prices have soared in the past couple of years. However, so have construction costs.
We Are All Keynesians Now...The way out is to cut spending, cut tax rates, cut regulation, and tighten money enough to stop inflation. Because in the end, Keynesian policies don’t create wealth…free and open markets do.
Inflation Games. Inflation is a political lightning rod... Politicians blame war, or COVID, but the simple explanation is just too much money creation.
What the Feds "Should" Do. There is a time and place for gradualism in monetary policy, particularly when the unemployment rate is still above normal or when inflation is only a little above the Fed's long-term target. This is not that time and place.